IRS issues sample shared employer responsibility payment letter

The IRS has issued a sample of Letter 226J, which an applicable large employer (ALE) is likely to receive if the IRS determines that, for at least one month in the year, one or more of the ALE’s full-time employees was enrolled in a qualified health plan for which a premium tax credit was allowed. Letter 226J describes the general procedures the IRS will use to propose and assess the employer shared responsibility payment (ESRP).

About the ESRP.

The ESRP rules apply only to ALEs, which are generally employers that had an average of 50 or more full-time employees (including full-time equivalent employees) during the preceding calendar year. Penalties for the ESRP are set forth in Code Sec. 4980H.

What’s included.

The letter includes a brief explanation of the penalty provisions of Code Sec. 4980H, along with an ESRP summary table that itemizes the proposed ESRP by month, and indicates for each month if the liability is under Code Sec. 4980H(a), Code Sec. 4980H(b), or neither. In the letter, the IRS advises that the ALE must tell the IRS whether or not it agrees or disagrees with the proposed ESRP by the response date, on the front of letter 226J, which will generally be 30 days from the date of the letter. The letter will include a description of actions the ALE should take, depending upon whether it agrees or disagrees with the proposed ESRP.
Also included are an employer shared responsibility response form, Form 14764, “ESRP Response,” and an employee premium tax credit (PTC) list (Form 14765) which lists, by month, the ALE’s assessable full-time employees along with the indicator codes, if any, the ALE reported on lines 14 and 16 of each assessable full-time employee’s Form 1095-C.
The IRS states that, if an ALE does not respond by the response date, it will send a Notice and Demand for the ESRP, which will be subject to IRS lien and levy enforcement actions. Interest will accrue from the date of the Notice and Demand and will continue until the total balance is paid.